Needless to say, the currency sensitivity for Japan exporters is a large swing factor for corporates, particularly automobile and technology exporters. When we wrote our last blog update on November 29, the yen had started to creep up from the Y78-80 range, but obviously not to the extent of Y89 to $1USD where it is today. Canon and Nikon are 2 of the most currency-sensitive tech names given their camera and other precision exports. Canon's OP moves about 3% of total OP for every Y1 move against the dollar and euro. Nikon's OP sensitivity is 2.4%. Thus, if the yen holds at Y89 for 2013 from Y79 in 2012, Canon's OP would rise about 30% YoY solely on the currency. Today's Nikkei mentioned that Canon's OP could rise 20% this year. We think this is on the low-end.
Just to update our views, we recommended buying Sharp, Nikon, and Tokyo Electron last year November 29. We did a round of tech visits in November and came away with warm fuzzy thoughts on these 3 names. See our note from Nov. 29 for more details.
Sharp in particular seemed oversold and over-hated.
Since November 29, Sharp has doubled while the TOPIX is up 16%. Nikon is up 21%. TEL is up only 13%, and thus the laggard in the bunch. Intel's capex forecast announcement of $13bn for 2013 versus $11bn in 2012 is positive for TEL, Advantest, etc. Look for TEL and Nikon to continue to be bid up going into the end of year earnings (April-May).
Happy hunting and all the best in 2013!
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